How Does Rising inflation may lead to global interest rate hike Work?

Rising inflation is like when your favorite candy gets more expensive every week, and everyone knows it.

Imagine you have a piggy bank full of coins that you use to buy toys. If the prices of those toys go up because of inflation, you need more coins to buy the same number of toys. That’s not fun!

Now, think about interest rates like the price of borrowing money. When banks want people to borrow less (so they can save more), they raise that price, and that's an interest rate hike.

If inflation keeps rising, it's like a big shout in the toy store: “Prices are going up!” So, the bank says, “Let’s make borrowing more expensive so people will save more money instead of spending it all on toys.” That’s when global interest rates go up, not just in one country, but around the world.

• If you borrow money (like for a bike or a video game), you might have to pay back more.
• If you save money in a bank, it might earn more, like getting extra stickers on your piggy bank!
• People and countries all over the world start adjusting their spending and saving habits.

It’s like when everyone hears that candy is going up, they all decide to save more coins for later.